The idea of a decline in the safety of U.S. Treasuries causing a flight to safety in which investors buy still more U.S. bonds is a sign that markets are truly irrational.

But if nothing effective is done, this game eventually will come to an end. As the U.S. credit rating is downgraded again and again, somewhere this side of BBB-minus (the lowest "investment grade" rating) the markets will finally panic and decide that U.S. deficits can no longer be supported. That will make it impossible to sell enough Treasuries to finance America's debt burden.

As in the case of Greece last year, this is likely to happen quite suddenly. And when it happens, the market's negative verdict will be irreversible.

Furthermore, since there is no kind Sugar Daddy such as the European Central Bank (ECB) standing by with its force of German taxpayers ready to bail out the U.S. Treasury, the U.S. will be forced to default.

That will be very painful in the short run, but in the long run will be a good thing.

After all, there is no reason why governments should be considered better credit risks than top- quality companies.

The Proctor & Gamble Co. (NYSE: PG) and The Coca-Cola Co. (NYSE: KO) make tangible products that people want to buy - and they do so at tightly controlled costs. So it's clear that companies like these can repay modest levels of debt under almost any circumstances.

The same is not true for a government - especially one that makes no money itself, produces few goods and services of value, and obtains money only by squeezing its unfortunate taxpayers.

Just imagine a world in which investors won't lend to governments: That's a world in which governments cannot overspend - they won't have the money.

That's a world in which resources cannot be diverted from the productive to the unproductive. That's also a world in which economic power is determined by success - and one in which the chairman of Coca-Cola has more credibility than the U.S. Treasury s ecretary.

Our leaders down in Washington may think that such a world is pure hell - a civil servant's version of Dante's Inferno.

But for investors like you and me, a world like that - where everything makes sense - is a financial Nirvana

I agree, It means we have to face our demons face on and while they print money many blind themselves to these demons and wish to hand the problem over to their offspring. Such a selfish act it is disgusting!

Let gird our loins and take what we have coming instead of making the problem bigger.

3
posted on 02/24/2012 9:48:16 AM PST
by jafojeffsurf
(Return to the Constitution)

—— The only way to cover that interest is inflation via fiat “momopoly” money. This is stealing our savings——

The alternative is default.

The reason why default is never mentioned as a possibility by the Socialist media, is because default will destroy U.S. govt credit, making it impossible for govt to borrow. It would force balanced budgets for a generation.

Socialists prefer inflation, which is disguised taxation, or even austerity. But a Keynesian’s worst nightmare is a government unable to borrow money.

——Default may scare socialists, but it doesn’t scare the Marxists. Marxists want a default to create a crisis opportunity. Then they can nationalize every corporation they blame for causing the default.——

That’s true, and worth war-gaming.

My intuition says that in the post-default world, we can anticipate a fairly orderly restructuring, as in Eastern Europe post-communism.

Those living off of the taxpayer may riot for a brief period, but will lack the resources to do more, even with outside aid. See the Occupod movement. They will rapidly run out of resources, and will be busy looking for work and finding relatives to move in with.

Increasing the debt is stealing our savings too. Government has to eventually pay that, and that means all of us pay it.

In a fiat money system, and one that allows banks to create over 90% of their “money” out of thin air via fractional reserve lending, taxes are simply not needed. It’s totally a punitive system designed to control people and punish those doing well.

House of Cards that will eventually destroy itself. Along with most people under it. This regime is trying to make that self-destruction happen sooner rather than later.

10
posted on 02/24/2012 10:04:14 AM PST
by Secret Agent Man
(I'd like to tell you, but then I'd have to kill you.)

Deflation of the currency means inflation of the price of goods and services. Printing enough money to pay our creditors would cause deflation of the currency and inflation in the price of goods and services.

As to why, because it could be done gradually, and it would not be a breach of the promise our nation gives when we borrow money, which will count for a lot when we need to sell our goods overseas.

Moreover a default by us would trigger a default by everyone else. Welcome to worldwide depression!

19
posted on 02/24/2012 2:24:36 PM PST
by allmendream
(Tea Party did not send the GOP to D.C. to negotiate the terms of our surrender to socialism.)

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